Determine the total annual inventory costs of the policy

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Reference no: EM131336468

Allstar Shoe Company produces a wide variety of athletic-type shoes for tennis, basketball, and running. Although sales are somewhat seasonal, production is uniform throughout the year. Allstar's production and sales average 1.92 million pairs of shoes per year. The company purchases shoelaces for its entire product line. Shoelaces are bought in lots of 10,000 pairs at a price of $800 per lot.

Ordering costs are $20, including the cost of preparing the purchase order and inspecting the shipment when it arrives at the company's warehouse. Annual inventory carrying costs average 15 percent of the inventory value.

Assuming that the shoelace manufacturer is located nearby and that orders are filled on the same day they are placed (that is, virtually instantaneously), determine the following:

a. The EOQ for shoelaces

b. The total annual inventory costs of this policy

c. The frequency with which Allstar should place its orders for shoelaces.

Reference no: EM131336468

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